Foot Locker’s the turnaround is beginning to bear some fruit.
The sneaker giant saw sales decline 1.8% during its fiscal first quarter, better than the 3.1% decline analysts were expecting, according to StreetAccount.
The company also reaffirmed its guidance for the fiscal year, which estimates sales to be between a 1% decline and a 1% gain, compared to a 0.6% decline that analysts had predicted, according to LSEG.
Shares of Foot Locker rose 15% Thursday.
Here’s how the company compares to what Wall Street expected, based on an analyst survey by LSEG:
- Earnings per share: 22 cents adjusted vs 12 cents expected
- result: $1.88 billion vs $1.88 billion expected
Foot Locker’s net income for the three-month period ended May 4 was $8 million, or 9 cents per share, compared with $36 million, or 38 cents per share, a year earlier. Adjusting for one-time items, including disruptions related to certain store closings and restructuring, among other costs, Foot Locker reported earnings of 22 cents per share.
Sales fell to $1.88 billion, down about 3% from $1.93 billion a year earlier.
For the full year, Foot Locker expects adjusted earnings per share to be between $1.50 and $1.70, ahead of estimates of $1.57, according to LSEG.
The company expects comparable sales growth of between 1% and 3%, ahead of the 1.5% growth expected by analysts, according to StreetAccount.
“We had a solid start to the year in the first quarter, which shows that the Lace Up Plan is working,” CEO Mary Dillon told CNBC in an interview. “The reason I believe it is – we launched an enhanced FLX rewards program, so we have a lot of opportunities with rewards. We see growth opportunities … with all our brand partners throughout the year, including a return to growth with Nike in the holiday season.
Dillon, former CEO of Ulta Beautyhas been used to turn Foot Locker around, but those efforts have taken longer than expected.
Sales have been falling steadily as retailers contend with low-income consumers who have felt inflation more acutely than other shoppers.
The company also contends with mercurial brand partners, such as Nike, which has been pulled back in the number of new releases for Foot Locker’s stores. In April, Nike CEO John Donahoe admitted that the brand had gone too far in making wholesalers in favor of its own stores and websites. Donahoe told CNBC that Nike is “investing heavily with our retail partners” as it goes through its own turnaround efforts.
Sports Champs banner Foot Locker has also weighed on its overall business, with comparable sales down 13.4% in the quarter and overall revenue down nearly 19%.
Foot Locker must rely on promotions to generate sales. However, it is starting to look up for the company.
While Foot Locker’s core consumers are still under pressure from inflation, Dillon said the company’s average selling price increased during the quarter, proving that consumers are willing to pay full price for the right products.
“Our consumers … this is a very important category for them. So if people have discretionary income, it may be limited, but you will prioritize where you spend it, right?” Dillon said. “So they prioritize, but I say spend with a purpose.”
Dillon has also been working to renovate its Foot Locker stores, which still do about 80% of its annual sales. They are building new non-mall locations, closing underperforming stores and refreshing existing locations. With these changes, the plan is to persuade brands to deliver the best products and consumers to choose Foot Locker instead of shopping with the brand directly or at competitors, such as Dick’s Sporting Goods.
In April, the retailer opened a “store of the future,” completely overhauling the old-school Foot Locker format and serving as a model for a store refresh.
“Instead of a shoe wall, it’s really a brand house,” Dillon said. “And I think it’s going to live in a way that makes our brand partners happy. We’ve heard that from everybody.”
